Target wins monthly Walmart price battle

SPOTLIGHT ON RETAIL

Updated 7:31 pm, Friday, August 24, 2012

Target cut into Walmart's lead in food prices this month to gain ground in the stores' pricing battle.

Target cut into Walmart's lead in food prices this month to gain ground in the stores' pricing battle.

Photo: M. Spencer Green, Associated Press

Target wins monthly Walmart price battle

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Target Corp. is living up to the second half of its "Expect more. Pay less." slogan by winning the latest round in its pricing battle with Walmart.

Target this month had lower prices than Walmart for the first time since October, according to research conducted by Bloomberg Industries.

The chain also led by its widest margin since the monthly study began two years ago. The study examined the gap in average price across a basket of 150 like items at stores within 5 miles of each other.

The discounters are fighting for U.S. customers who are still dealing with high unemployment and slow wage growth.

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The chains also are facing more competition from online retailers such as Amazon.com Inc., which offers free shipping and is adding distribution centers to speed up delivery time.

Consumers who shop at discount chains "are trying to stretch their budgetary dollars as much as possible," said Jennifer Bartashus, an analyst for Bloomberg Industries. "They will be driven to whatever store offers the better value."

The second-largest U.S. discounter won this month by cutting into Walmart's lead in food prices. Walmart's advantage in groceries fell to 1.35 percentage points from 4.5 percentage points in July. Target's improvement in food may have come because of more promotions tied to back-to-school shopping, Bartashus said.

Walmart is still the price leader, and if a rival shows lower prices, it is either because of a temporary sale or promotion, said company spokeswoman Deisha Galberth Barnett.

The price leadership by Target is a surprise because the retailer doesn't try to beat Walmart on price across the entire store, said Patrick McKeever, managing director with MKM Partners. The two retailers will battle on key categories, he said.

"Target is very focused on being priced on par with Walmart, especially in things like consumables and cleaning products," McKeever said. "They try to be competitive with Walmart on items that are the most visible."

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